excel amortization
Taja Charrier
LSP 120
11/4/13
Activity 12
1. Suppose that you deposit $500 in a bank that offers an annual percentage rate of 6.0% compounded annually.
a. What is your account balance after one year? 530
b. What is your account balance after 10 years? 895.42
2. How long will it take your money to triple at an annual percentage rate of 8% compounded annually? 14.27 years
3. Suppose that you deposit $750 in a bank that offers an annual percentage rate of 4.0% compounded monthly.
a. What is your account balance after one year? 812.25
b. What is your account balance after 8 years? 1234.92
c. What is the annual percentage yield for this account? (Recall that the annual percentage yield is the percentage change in the account for one year, in this case in 12 months.) 8.3%
4. Compare the accumulated balance in three accounts that all start with an initial deposit of $1000. All three accounts have an annual percentage rate of 5.5%, but the first account compounds interest annually, the second account compounds interest quarterly while the third account compounds interest monthly. Make a table that shows the accumulated balance in all three accounts for the first ten years.
a. Paste the first ten rows of each table your Word document.
annual quarterly monthly
0
1000
1000
1000
1
1055
1056.144809
1056.408
2
1113.025
1115.441858
1115.998
3
1174.241
1178.068128
1178.949
4
1238.825
1244.210538
1245.451
5
1306.96
1314.066502
1315.704
6
1378.843
1387.844515
1389.92
7
1454.679
1465.76478
1468.322
8
1534.687
1548.059864
1551.147
9
1619.094
1634.97539
1638.644
10
1708.144
1726.770771
1731.076
b. Write a short paragraph discussing the differences between the accounts indicating which account is the largest and which is the smallest.
The differences between these three accounts is that the shorter the time of the compound interest, annual vs. quarterly vs. monthly, the more money is accrued in the account.
LSP 120
11/4/13
Activity 12
1. Suppose that you deposit $500 in a bank that offers an annual percentage rate of 6.0% compounded annually.
a. What is your account balance after one year? 530
b. What is your account balance after 10 years? 895.42
2. How long will it take your money to triple at an annual percentage rate of 8% compounded annually? 14.27 years
3. Suppose that you deposit $750 in a bank that offers an annual percentage rate of 4.0% compounded monthly.
a. What is your account balance after one year? 812.25
b. What is your account balance after 8 years? 1234.92
c. What is the annual percentage yield for this account? (Recall that the annual percentage yield is the percentage change in the account for one year, in this case in 12 months.) 8.3%
4. Compare the accumulated balance in three accounts that all start with an initial deposit of $1000. All three accounts have an annual percentage rate of 5.5%, but the first account compounds interest annually, the second account compounds interest quarterly while the third account compounds interest monthly. Make a table that shows the accumulated balance in all three accounts for the first ten years.
a. Paste the first ten rows of each table your Word document.
annual quarterly monthly
0
1000
1000
1000
1
1055
1056.144809
1056.408
2
1113.025
1115.441858
1115.998
3
1174.241
1178.068128
1178.949
4
1238.825
1244.210538
1245.451
5
1306.96
1314.066502
1315.704
6
1378.843
1387.844515
1389.92
7
1454.679
1465.76478
1468.322
8
1534.687
1548.059864
1551.147
9
1619.094
1634.97539
1638.644
10
1708.144
1726.770771
1731.076
b. Write a short paragraph discussing the differences between the accounts indicating which account is the largest and which is the smallest.
The differences between these three accounts is that the shorter the time of the compound interest, annual vs. quarterly vs. monthly, the more money is accrued in the account.